Olympic Sports Ltd. (OSL) manufactures custom made bicycles and uses job-order costing. Most of its business is obtained through bidding. OSL normally develops bid price on the basis of full product cost plus a 20 per cent mark-up. The company conducts operations with two production departments (i.e., Assembly and Finishing) and two service departments (i.e., Maintenance and Human Resources). It is estimated that seventy per cent of the direct overhead costs of these departments are fixed and the balance is variable. The 2015 budgeted costs and activity levels for each department are given below: (c) Calculate the total quantity of bikes that must be sold in 2015 so as to breakeven. Show the quantity of each type of bike that must be sold at breakeven. Round all calculations to two decimal places. Show all workings clearly and logically. (6 marks) (d) Calculate the number of bikes (in total and of each type) that must be sold for OSL to earn a target profit of $45,000. Round all calculations to two decimal places. Show all workings clearly and logically, (2 marks) Service Departments Maintenance Human Resource $80,000 $160,000 8 200 Direct overhead costs Number of employees Maintenance hours Machine hours Labour hours Production Departments Assembly Finishing $120,000 $75,000 30 30 6,400 1,600 8,000 1,000 1,000 10,000 (4+3+ 6 + 2 - 15 marks) Maintenance costs are allocated on the basis of maintenance hours; those of Human Resources are allocated on the basis of number of employees. Overhead costs are assigned to products using departmental rates. The Assembly Department uses machine hours while the Finishing Department uses labour hours. During the first quarter of 2015, OSL produced two types of bikes: Mountain bikes and Racing bikes. In addition to the direct overhead costs of departments listed above, the company incurs variable selling and delivery costs of $5 per bike sold. Additionally, the annual fixed selling expense for 2015 is estimated to be $25,000. Past sales data indicates that the company's sales mix has been 60% Mountain bikes and 40% Racing bikes. The following table summarises production requirements per unit of the two bikes: Estimated prime cost per unit Machine hours in Assembly Labour hours in Finishing Mountain bikes Racing bikes $175 $180 5 2.5 4 3 Required: (a) Allocate the service department costs to production departments using the step-down method. Calculate the pre-determined overhead application rate for each department Round all calculations to two decimal places. Show all workings clearly and logically. (4 marks) (b) Calculate the per unit sales prices of Mountain bikes and Racing bikes. Round all calculations to two decimal places. Show all workings clearly and logically. (3 marks) Olympic Sports Ltd. (OSL) manufactures custom made bicycles and uses job-order costing. Most of its business is obtained through bidding. OSL normally develops bid price on the basis of full product cost plus a 20 per cent mark-up. The company conducts operations with two production departments (i.e., Assembly and Finishing) and two service departments (i.e., Maintenance and Human Resources). It is estimated that seventy per cent of the direct overhead costs of these departments are fixed and the balance is variable. The 2015 budgeted costs and activity levels for each department are given below: (c) Calculate the total quantity of bikes that must be sold in 2015 so as to breakeven. Show the quantity of each type of bike that must be sold at breakeven. Round all calculations to two decimal places. Show all workings clearly and logically. (6 marks) (d) Calculate the number of bikes (in total and of each type) that must be sold for OSL to earn a target profit of $45,000. Round all calculations to two decimal places. Show all workings clearly and logically, (2 marks) Service Departments Maintenance Human Resource $80,000 $160,000 8 200 Direct overhead costs Number of employees Maintenance hours Machine hours Labour hours Production Departments Assembly Finishing $120,000 $75,000 30 30 6,400 1,600 8,000 1,000 1,000 10,000 (4+3+ 6 + 2 - 15 marks) Maintenance costs are allocated on the basis of maintenance hours; those of Human Resources are allocated on the basis of number of employees. Overhead costs are assigned to products using departmental rates. The Assembly Department uses machine hours while the Finishing Department uses labour hours. During the first quarter of 2015, OSL produced two types of bikes: Mountain bikes and Racing bikes. In addition to the direct overhead costs of departments listed above, the company incurs variable selling and delivery costs of $5 per bike sold. Additionally, the annual fixed selling expense for 2015 is estimated to be $25,000. Past sales data indicates that the company's sales mix has been 60% Mountain bikes and 40% Racing bikes. The following table summarises production requirements per unit of the two bikes: Estimated prime cost per unit Machine hours in Assembly Labour hours in Finishing Mountain bikes Racing bikes $175 $180 5 2.5 4 3 Required: (a) Allocate the service department costs to production departments using the step-down method. Calculate the pre-determined overhead application rate for each department Round all calculations to two decimal places. Show all workings clearly and logically. (4 marks) (b) Calculate the per unit sales prices of Mountain bikes and Racing bikes. Round all calculations to two decimal places. Show all workings clearly and logically